Breif Excercise-Inventory
Midori Company had ending inventory at end-of-year prices of $138,500 at December 31, 2013; $165,771 at December 31, 2014; and $181,366 at December 31, 2015. The year-end price indexes were 100 at 12/31/13, 113 at 12/31/14, and 118 at 12/31/15.
Compute the ending inventory for Midori Company for 2013 through 2015 using the dollar-value LIFO method.
2013
2014
2015
Ending Inventory
$138,500
$147,766
$156,026
Brief Exercise 8-9
Your answer is correct.
Arna, Inc. uses the dollar-value LIFO method of computing its inventory. Data for the past 3 years follow.
Year Ended
December 31
Inventory at
Current-Year Cost
Price
Index
2013
$20,000
100
2014
22,363
107
2015
26,656
112
Compute the value of the 2014 and 2015 inventories using the dollar-value LIFO method.
2014
2015
Inventory under LIFO
$20,963
$24,211
Ann M. Martin Company makes the following errors during the current year. (In all cases, assume ending inventory in the following year is correctly stated.)
1.
Ending inventory is overstated, but purchases and related accounts payable are recorded correctly.
2.
Both ending inventory and purchases and related accounts payable are understated. (Assume this purchase was recorded and paid for in the following year.)
3.
Ending inventory is correct, but a purchase on account was not recorded. (Assume this purchase was recorded and paid for in the following year.)
Indicate the effect of each of these errors on working capital, current ratio (assume that the current ratio is greater than 1), retained earnings, and net income for the current year and the subsequent year.
Current Year
Subsequent Year
1.
Working capital
Overstated
No effect
Current ratio
Overstated
No effect
Retained earnings
Overstated
No effect
Net income
Overstated
Understated
2.
Working capital
No effect
No effect
Current ratio
Overstated
No effect
Retained earnings
No effect
No effect
Net income
No effect
No effect
3.
Working capital
Overstated
No effect
Current ratio
Overstated
No effect
Retained earnings
Overstated
No effect
Net income
Overstated
Understated
and other questions
